The Role of Small and Medium Enterprises in Poverty Alleviation and Economic Well-Being

Abstract

In socio-economic development and poverty reduction, particularly in countries with agrarian economies and a high proportion of rural populations small and medium-sized enterprises (SMEs) are essential. Due to limited government resources for supporting social sectors, SMEs become  means for job creation, household income growth, and economic stimulation. The purpose of this study is to examine the role of SMEs in well-being development and poverty reduction in Kazakhstan. For this purpose, there was conducted regression analysis and the study was focused on three main independent variables: SME share in GDP, employment in agriculture, and employment in individual entrepreneurship. The data covers the period from 2013 to 2023. The results showed that the SME contribution to GDP has a significant positive effect on household incomes and thus key role in enhancing economic well-being. Employment in individual entrepreneurship was directly associated with income growth and improved well-being, particularly in rural areas. Employment in agriculture demonstrated a dual effect: while it remained an essential source of income, its impact was constrained by low labor productivity and seasonality. However, crucial effect on poverty reduction and well-being improvement was achieved through the combined influence of SMEs, individual entrepreneurship, and agricultural employment. Thus, there is great need in diversifying income sources and adopting a comprehensive approach to economic development for effective poverty reduction.